Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — H1 2020 Earnings Presentation
55 slides from Life Healthcare's earnings presentation, May 11, 2020
Slide 1: Unaudited Group Interim Results for the period ended 31 March 2020
UNAUDITED GROUP INTERIM RESULTS FOR THE PERIOD ENDED 31 MARCH 2020 AND TRADING STATEMENT
Slide 2: Group Overview: Strong Operational Performance
2 GROUP OVERVIEW STRONG OPERATIONAL PERFORMANCE Revenue +6.8% Quality scores COVID-19 estimated financial to R13.2 billion generally improves in impact of R264 million on Normalised EBITDA revenue and R166 million on southern Africa and pre-IFRS 16 +2.7% normalised EBITDA International to R2.8 billi
Slide 3: Delivery on Operational Excellence Goals Despite COVID-19
3 H1 2020 | GROUP OVERVIEW DELIVERY ON OPERATIONAL EXCELLENCE GOALS, DESPITE IMPACT OF COVID-19 PANDEMIC Strong overall business performance with good growth in revenue across all business lines Life Healthcare Good progress on stabilising margins with business optimisation initiatives deliverin
Slide 4: Five Key Focal Points Pre-COVID-19 Pandemic
4 H1 2020 | GROUP OVERVIEW FIVE KEY FOCAL POINTS PRE-COVID-19 PANDEMIC Improvement in normalised EBITDA margins excluding COVID-19 pandemic impact in SA Operational efficiency Margin improvement in PET-CT wave 1 in the UK Preston re-opened in March 2020. Margin improvement expected on the back
Slide 5: Strategic Focus Areas
5 H1 2020| GROUP OVERVIEW STRATEGIC FOCUS AREAS CONTINUED PROGRESS MADE ON THE IMPLEMENTATION OF DIVERSIFYING ACROSS BUSINESS LINES AND TERRITORIES Revenue (%) EBITDA (%) Acute versus non-acute revenue (%) 21% 18% 22% 24% 23% 20% 26% 29% 29% 31% 33% 33% 79% 82% 78% 76% 77% 80% 74% 71% 71% 69% 67% 67
Slide 6: COVID-19 Estimated Financial Impact
6 H1 2020 | GROUP OVERVIEW COVID-19 ESTIMATED FINANCIAL IMPACT SAFEGUARD FINANCIAL POSITION STRENGTH AND FLEXIBILITY Group Southern Africa International Revenue R264 million Revenue R112 million Revenue GBP7.9 million COVID-19 EBITDA R67 million EBITDA GBP5.2 million EBITDA R166 million impact Earni
Slide 7: Operational Review: Southern Africa
OPERATIONAL REVIEW SOUTHERN AFRICA ADAM PYLE| SA CEO
Slide 8: Southern Africa COVID-19 Response
8 H1 2020 SOUTHERN AFRICA COVID-19 RESPONSE COVID-19 specific plans covering facilities, operations, employees and clinical interventions Adopted guidelines issued by the DoH, NICD, WHO and various medical societies COVID-19 Focus on ensuring adequate PPE for employees and doctors and increase
Slide 9: Southern Africa COVID-19 Impact
9 H1 2020 SOUTHERN AFRICA COVID-19 IMPACT Strong results prior to COVID-19 impact COVID-19 impact 2% PPD growth to end February 2020 Acute occupancies during lockdown (Alert level 5) fell to 40%: 67.3% Occupancy to end February 2020 − 34% reduction in emergency cases − 41% reduction in medical
Slide 10: Medically Necessary Admissions / Procedures
10 H1 2020 SOUTHERN AFRICA COVID-19 RESPONSE Medically Necessary Admissions / Procedures The Group has implemented plans across its facilities for the return of medically necessary admissions to ensure the COVID-19 risk is carefully and appropriately managed, including: − testing of patients befor
Slide 11: Southern Africa Business Overview
11 SOUTHERN AFRICA BUSINESS OVERVIEW Acute hospitals Complementary services Healthcare services Revenue R’m Proportion of R8 180 million R565 million R657 million 6.6% Four year CAGR SA revenue 87.0% 6.0% 7.0% 657 609 565 49 acute 8 500 admissions 10 PPP* 568 503 hospitals facilities 399 467 120 448
Slide 12: Southern Africa Business Review: Good Overall Performance
12 SOUTHERN AFRICA BUSINESS REVIEW: GOOD OVERALL PERFORMANCE March March % 2020 2019 change Strong PPD growth negatively impacted by COVID-19 in the last PPD growth 0.2% -0.3% few weeks of March Revenue (R’m) 9 402 8 847 6.3 As of end Feb 2020: − PPD growth: 2.0% Business as usual (R’m) 9 514 8
Slide 13: Southern Africa Occupancy
13 SOUTHERN AFRICA Occupancy (%) As at end February 2020: − Good occupancy improvement: 67.3% 74.8 (Feb 2019: 66.8%) 73.4 − Combined PPD growth: 2.0% 72.6 71.8 Acute: 1.3%: Good network PPD growth 64 doctors recruited (net) 67.7 67.0 67.3 67.1 Complementary services: 8.0% 66.8 66.8 66.5 66
Slide 14: Continued Focus on Quality Outcomes and Patient Experience
14 QUALITY CONTINUED FOCUS ON QUALITY OUTCOMES AND PATIENT EXPERIENCE 2020 2019 Change Measure Patient experience Patient experience scores on par Definitely recommend 70.7 70.8 percentage with H1 2019 and FY 2019 Patient experience 8.39 8.4 Good improvement across HAI Patient quality and sa
Slide 15: Healthcare Services Revenue and EBITDA
15 HEALTHCARE SERVICES REVENUE AND EBITDA Revenue (R’m) EBITDA (R’m) Life Esidimeni EBITDA margin Good revenue growth driven by increased +7.9% 657 11.5% 10.8% PPD volumes and improved tariffs 609 71 70 EBITDA margins stabilized Life Employee Health Solutions Solid revenue growth Contracts i
Slide 16: Operational Review: International
OPERATIONAL REVIEW INTERNATIONAL MARK CHAPMAN| INTERNATIONAL CEO
Slide 17: International COVID-19 Response: Patient and Employee Safety
17 H1 2020 | COVID-19 RESPONSE INTERNATIONAL Patient and employee safety Government measures vary from country to country with different responses according to local healthcare policy Adhered to country specific government and health policy guidelines within an over-arching Group best practice f
Slide 18: International COVID-19 Response: Revenue/Cash Preservation
18 H1 2020 | COVID-19 RESPONSE INTERNATIONAL Revenue/cash preservation measures Scanning volumes decreased by an average of 60% as national healthcare systems prioritised urgent and emergency cases Each country has taken steps to protect revenue streams, reduce costs and preserve cash, working i
Slide 19: Alliance Medical Overview
19 INTERNATIONAL | ALLIANCE MEDICAL OVERVIEW United Kingdom (UK) Italy Ireland Other geographies DI static sites 32 Spain Netherlands Germany Finland PET-CT national Owned clinics 33 Operating sites 29 contract sites 36 Static sites 9 Mobiles 42 Estonia Norway Switzerland Austria Reven
Slide 20: Strong Underlying Growth in Scan Volumes
20 INTERNATIONAL | ALLIANCE MEDICAL STRONG UNDERLYING GROWTH IN SCAN VOLUMES MRI and CT scans PET-CT scans Total monthly volumes 400 000 145 018 141 408 141 821 138 520 131 049 58 471 350 000 125 150 51 353 300 000 250 000 71 535 70 430 200 000 150 000 100 000 50 000 0 UK Italy Ireland Other UK Oct
Slide 21: Patient Volumes Have Plateaued and Are Beginning to Increase
21 INTERNATIONAL | ALLIANCE MEDICAL PATIENT VOLUMES HAVE PLATEAUED AND ARE BEGINNING TO INCREASE UK Ireland DI 60% 65% Country Country PETCT lockdown lockdown Italy Lockdown widened Overall reduction is 60% to 70% of weekly volumes Maintaining core services Country lockdown Small number of sit
Slide 22: Scan Volumes Beginning to Return in Some Regions
22 INTERNATIONAL | ALLIANCE MEDICAL SCAN VOLUMES BEGINNING TO RETURN IN SOME REGIONS Crisis management COVID-19 operations Recovery strategy Implementation of new state of Activity growth to pre-COVID-19 Regions adapt at pace to operational delivery. Guiding levels, new WoW, growth understand and ac
Slide 23: Alliance Medical (Excluding LMI): Stable Overall Performance
22 INTERNATIONAL | ALLIANCE MEDICAL (EXCLUDING LMI) STABLE OVERALL PERFORMANCE 2020 2019 Change % Good revenue growth compared to H1 2019 mostly driven by: Revenue (£’m) 151.5 145.3 4.3 − Strong growth in PET-CT scan volumes in the UK Normalised EBITDA (£’m) 29.5 33.2 (11.1) − Growth across Irelan
Slide 24: United Kingdom
24 INTERNATIONAL | ALLIANCE MEDICAL UNITED KINGDOM (UK) MI as a % of UK revenue Molecular Imaging (MI) PET-CT wave 1 52% 57% 59% − MI growth underpinned by 10-year PET-CT 46% wave 1 contract 2017 2018 2019 H1 2020 − Pricing certainty until December 2025 PET-CT wave 1 volumes PET-CT wave 2 50 000
Slide 25: UK Radiopharmacy: Future Proofing
25 INTERNATIONAL | UK RADIOPHARMACY FUTURE PROOFING With strong growth in PET-CT the planned refurbishment Refurb Period has resulted in operational challenges while the business has operated three of the four cyclotron sites Limiting capacity during this period has negatively impacted costs A
Slide 26: UK: Growth in Longer-Term Contracts
26 INTERNATIONAL | ALLIANCE MEDICAL UK Growth in longer-term contracts Diagnostic imaging (DI) Long-Term Short-Term Strategic focus continues to be on long-term 41 36 31 56 partnership solutions with hospital trusts UK DI volumes up c.7% (February YTD) excluding the 59 64 69 44 impact of site ga
Slide 27: Italy and Ireland
27 INTERNATIONAL | ALLIANCE MEDICAL - OTHER KEY MARKETS ITALY AND IRELAND Revenue down 5.9% as a result of COVID-19 impact in March 2020 2.2% growth February YTD on the back of increasing volumes and acquisitions Slower growth in private revenue, 1% year-on-year (pre-COVID-19) Focus on maxim
Slide 28: Poland: Strong Performance
28 INTERNATIONAL | POLAND STRONG PERFORMANCE The Group has decided to suspend the process of potentially disposing of Scanmed due to the uncertainty and market volatility brought on by the COVID-19 pandemic The process is expected to restart towards the latter part of 2020, depending on market c
Slide 29: International Quality Outcomes
29 INTERNATIONAL QUALITY OUTCOMES Clinical quality indicator H1 FY20 FY19 FY18 Year-on-year trend Target UK Patient experience (satisfied and very satisfied) 97.4% 95.3% 94.4% >92.5% Friends and family score 96.3% 94.9% 94.5% >92.5% Written patient complaints per 10 000 scans 2.0 3.2 4.4 <5 Es
Slide 30: Operational Review: Growth Initiatives
OPERATIONAL REVIEW GROWTH INITIATIVES PIETER VAN DER WESTHUIZEN | ACTING GROUP CEO
Slide 31: Growth Initiatives
31 GROWTH INITIATIVES SA Imaging Opportunity LMI Good progress has been made regarding the development of Focus on driving sales of Neuraceq – radioactive tracer used to the imaging opportunity identify amyloid plaques in the brain in order to diagnose Timing of implementation impacted by COVI
Slide 32: Financial Review
FINANCIAL REVIEW PIETER VAN DER WESTHUIZEN | ACTING GROUP CEO
Slide 33: Highlights
33 HIGHLIGHTS Reported revenue Underlying revenue Normalised EPS +6.8% +8.9% Reported normalised EBITDA pre-IFRS16 Underlying normalised EBITDA pre-IFRS16 +12.0% to 55.0 cps +2.7% +8.7% Investments in Strong efficiency programmes Strong financial position Operational performance starting to deliver
Slide 34: Financial Statutory Results
34 FINANCIAL STATUTORY RESULTS GROUP 2020 2019 % Normalised EBITDA impacted by: R’m R’m change − IFRS 16 Leases Revenue 13 244 12 399 6.8 − COVID-19 pandemic Normalised EBITDA 2 923 2 733 7.0 − continued operational challenges Normalised EBITDA margin (%) 22.1 22.0 within radiopharmacy in the UK E
Slide 35: Financial Underlying Results
35 FINANCIAL UNDERLYING RESULTS GROUP 2020 2020 2020 2020 As IFRS 16 Estimated Underlying reported impact COVID-19 impact results¹ 2019 % R’m R’m R’m R’m R’m change Revenue 13 244 - 264 13 508 12 399 8.9 Normalised EBITDA 2 923 (117) 166 2 972 2 733 8.7 Normalised EBITDA margin (%) 22.1 (0.9) 0.8 22
Slide 36: Impact of IFRS 16 Leases and COVID-19
36 IMPACT OF IFRS 16 LEASES AND COVID-19 GROUP 2020 2020 2020 2020 IFRS 16 Estimated Underlying As reported impact COVID-19 impact results¹ 2019 R’m R’m R’m R’m R’m % change 13 244 - 264 13 508 12 399 IFRS 16 adopted from Revenue 8.9 1 October 2019 Southern Africa 9 402 - 112 9 514 8 847 7.5 No
Slide 37: Financial Results: Group
37 FINANCIAL RESULTS GROUP 2020 Normalised EBITDA margin (%) Constant Pre-IFRS 16 2019 currency % R’m R’m % 0.9 0.3 0.8 Revenue 5.4 13 244 12 399 6.8 22.1 22.0 22.0 22.3 22.0 Southern Africa 6.3 9 402 8 847 6.3 21.2 21.2 21.2 International 3.4 3 685 3 406 8.2 Pre-IFRS Estimated 2020 2019 IFRS 16 202
Slide 38: Financial Results: Earnings per Share
38 FINANCIAL RESULTS GROUP % 2020 2019 change Weighted average number of shares (million) 1 455 1 456 (0.1) Includes the impact of IFRS 16 Earnings negatively impacted by EPS (cents) 53.7 24.5 >100 R132 million (-9.1 cps) due to the COVID-19 pandemic Impairment of assets and investments - 2.5 Lo
Slide 39: Consolidated Condensed Statement of Financial Position
39 CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION Mar 2020 Sept 2019 Strong financial position R’m R’m Successful refinance of international debt in Non-current assets 35 902 31 588 Mar 2020. Reducing interest rate by approx. Property, plant and equipment 14 892 12 929 50bps and extendin
Slide 40: Cash Flow
40 CASH FLOW GROUP 2020 2019 % R’m R’m change R’m 2 700 120% Cash generated from operations 2 376 2 591 (8.3) Transaction costs paid (5) (30) 2 400 100% 100% Net interest paid (332) (454) 2 100 95% Tax paid (382) (477) 85% 1 800 81% 81% 80% Maintenance capex (598) (527) 77% Minority distributions (1
Slide 41: Cash Preservation
41 CASH PRESERVATION Due to the impact of COVID-19 the Group has implemented a number of short-term cash preservation levers The board has taken the prudent decision not to pay an interim dividend in order to preserve cash during this uncertain time due to the COVID-19 pandemic. This position will
Slide 42: Debt
42 DEBT Mar 2020 Mar 2020 Weighted avg. Sep 2019 Sep 2019 Weighted avg. cost Funding Local currency ’m R’m cost of debt Local currency ‘m R’m of debt (post-tax) (post-tax) Acquisition funding ZAR 550 550 5.79 650 650 6.99 PLN 94 410 3.74 95 362 3.76 GBP 139 3 094 1.95 139 2 598 2.44 Capex funding -
Slide 43: 2020 H2 Outlook
2020 H2 OUTLOOK PIETER VAN DER WESTHUIZEN | ACTING GROUP CEO
Slide 44: COVID-19 Outlook Scenarios
44 COVID-19 OUTLOOK SCENARIOS Alliance Medical Revenue SA PPDs Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep FY2019 FY2020 Base Bear FY2019 FY2020 Base Bear Infection peak forecast for August / September 2020 in line with Expect slow increase in
Slide 45: Outlook for H2 2020
45 H1 2020 | GROUP OVERVIEW OUTLOOK FOR H2 2020 Level and duration of COVID-19 pandemic remains uncertain Focus on treating our patients and looking after our employees and doctors COVID-19 Cut discretionary spend and reduce capex without causing longer term harm to the business Difficult en
Slide 46: Outlook for H2 2020: CEO Recruitment and International Nurses Day
46 H1 2020 | GROUP OVERVIEW OUTLOOK FOR H2 2020 CEO Recruitment Process put on hold until operating environment stabilises Process 2020 is the WHO year of the Nurse International Nurses Appropriate in these times that our nurses are recognised for the valuable role they play Day – 12 May 2020
Slide 47: Trading Statement
47 TRADING STATEMENT OUTLOOK FOR H2 2020 In FY2019 the Group disposed of its investment in Max Healthcare. This transaction resulted in a net profit of R1 billion consisting of: − a profit on disposal of the investment of R1.4 billion − transaction costs of R118 million − a hedge loss of R292 mill
Slide 48: Our Vision: Adapting Our Strategy for the New Environment
48 OUR VISION ADAPTING OUR STRATEGY FOR THE NEW ENVIRONMENT Innovate and further diversify our delivery Global healthcare provider with a model in southern Africa GROWTH 1 dual strategy offering an integrated Continue to grow our international healthcare model in southern Africa diagnostic imaging b
Slide 49: Appendix to COVID-19 Response
APPENDIX TO COVID-19 RESPONSE
Slide 50: Southern Africa COVID-19 Response
50 H1 2020 | GROUP OVERVIEW SOUTHERN AFRICA COVID-19 RESPONSE P R I O R I T I S I N G T H E S A F E T Y O F O U R E M P L O Y E E S , O U R D O C T O R S A N D PAT I E N T S COVID-19 PREPARATION COVID-19 specific plans covering facilities, operational, staffing and clinical interventions have been
Slide 51: Southern Africa COVID-19 Response: Employees and Facilities
51 H1 2020 | GROUP OVERVIEW SOUTHERN AFRICA COVID-19 RESPONSE P R I O R I T I S I N G T H E S A F E T Y O F O U R E M P L O Y E E S , O U R D O C T O R S A N D PAT I E N T S Employees Facilities management Establishing separate teams to limit the potential impact and spread Entrances reduced and
Slide 52: Planning for the Return of Medically Necessary Admissions
52 H1 2020 | GROUP OVERVIEW SOUTHERN AFRICA COVID-19 RESPONSE P R I O R I T I S I N G T H E S A F E T Y O F O U R E M P L O Y E E S , O U R D O C T O R S A N D PAT I E N T S Planning for the return of medically necessary admissions With South Africa returning out of lockdown this has enabled the r
Slide 53: COVID-19 Pandemic Stages
53 SOUTHERN AFRICA COVID-19 PANDEMIC STAGES Phase 1 Phase 2 Phase 3 Outbreak Infection peak New normal Lockdown flattened the infection curve Our view is informed by a SEIR (susceptible, Given the delay in elective surgery, we Acute occupancies post-introduction of exposed, infectious, recov
Slide 54: Group Overview: Risk, Cash Preservation, Financial Resilience
54 GROUP OVERVIEW Managing uncertainties and risk Cash preservation measures Financial resilience The impact of the economic environment Decision not to pay interim dividend Committed to maintaining and bolstering on the membership of medical schemes is Delaying capex projects without a stro
Slide 55: Unaudited Group Results
UNAUDITED GROUP RESULTS FOR THE PERIOD ENDED 31 MARCH 2020, AND TRADING STATEMENT
Life Healthcare Group Holdings — H1 2020 Earnings Presentation on 6ix